Economics (Irwin Economics)
21st Edition
ISBN: 9781259723223
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 41, Problem 3RQ
To determine
The exchange rate changes.
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8. Suppose that last year, the nominal exchange rate between the Japanese yen and the British pound was ¥150.0 per £1.0, one unit of Japanese output cost ¥1300, and one unit of British output cost £8.0.a. What was the real exchange rate between the U.K. and Japan last year, expressed as the cost of British output (i.e. – the quantity of Japanese output that exchanges for 1 unit of British output)? In which country were goods more expensive last year?
1) Assume Turkish lira (TL) is expected to depreciate by 10% over the next year against US dollar. If the Turkish interest rate is15%, what would be the US interest rate that can make a Turkish investor to be willing to buy US securities today? Assume capital is perfectly mobile between Turkey and US.
2-) If the price level of Turkish goods is 200, the price level of foreign goods is 125, and the lira price of foreign currency is 1.20, what is the real exchange rate? What is the meaning of this rate for the competitiveness of Turkish goods?
3-)With the help of an IS-LM diagram show and explain the effect of restrictive monetary policy on output under flexible exchange rates and perfect capital mobility
Suppose that the government of China is currently fixing the exchange rate between the U.S. dollar and the Chinese yuan at a rate of $1 = 6 yuan. Also suppose that at this exchange rate, the people who want to convert dollars to yuan are asking to convert $10 billion per day of dollars into yuan, while the people who are wanting to convert yuan into dollars are asking to convert 36 billion yuan into dollars. What will happen to the size of China’s official reserves of dollars? a. Increase. b. Decrease. c. Stay the same.
Chapter 41 Solutions
Economics (Irwin Economics)
Ch. 41.1 - Prob. 1QQCh. 41.1 - Prob. 2QQCh. 41.1 - Prob. 3QQCh. 41.1 - Prob. 4QQCh. 41.A - Prob. 1ADQCh. 41.A - Prob. 1ARQCh. 41.A - Prob. 1APCh. 41 - Prob. 1DQCh. 41 - Prob. 2DQCh. 41 - Prob. 3DQ
Ch. 41 - Prob. 4DQCh. 41 - Prob. 5DQCh. 41 - Prob. 6DQCh. 41 - Prob. 7DQCh. 41 - Prob. 8DQCh. 41 - Prob. 9DQCh. 41 - Prob. 10DQCh. 41 - Prob. 11DQCh. 41 - Prob. 1RQCh. 41 - Prob. 2RQCh. 41 - Prob. 3RQCh. 41 - Prob. 4RQCh. 41 - Prob. 5RQCh. 41 - Prob. 6RQCh. 41 - Prob. 7RQCh. 41 - Prob. 8RQCh. 41 - Prob. 9RQCh. 41 - Prob. 10RQCh. 41 - Prob. 1PCh. 41 - Prob. 2PCh. 41 - Prob. 3PCh. 41 - Prob. 4PCh. 41 - Prob. 5P
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- D6) Suppose that domestic price level for a basket of goods is given by P = 311 in domestic currency, and the foreign price level for the same basket of goods is given by P* = 5 in foreign currency. What should the exchange rate of domestic currency per foreign currency be according to absolute purchasing power parity? Round to the nearest whole number.arrow_forwardIf the real exchange rate for coal is 1.5, the price of coal in the United States is $50 per ton, and the price of coal in Britain is 20 British pounds per ton, what is the nominal exchange rate? a. 4/15 or 2.67 pounds per dollar b. 15/4 or 3.75 pounds per dollar c. 3/5 or 0.6 pounds per dollar d. 5/3 or 1.67 pounds per dollararrow_forward1 .Refer to the following table in which Qd is the quantity of yen demanded, P is the dollar price of yen, Qs is the quantity of yen supplied in year 1, and Qs ' is the quantity of yen supplied in year 2. All quantities are in billions and the dollar-yen exchange rate is fully flexible. Qd P Qs Qs' 160 145 480 320 240 140 400 240 320 135 320 160 400 130 240 80 a. What is the equilibrium dollar price of yen in year 1? b. What is the equilibrium dollar price of yen in year 2? 2. The following are production possibilities tables for China and the United States. Assume that before specialization and trade the optimal product-mix for China is alternative B and for the United States alternative U. Production Possibilities: China Product A B C D E F Apparel 150,000 120,000 90,000 60,000 30,000 0 Chemicals (in Tons) 0 30 60 90 120 150 Production Possibilities:…arrow_forward
- 7 Suppose the exchange rate was 104 yen per dollar in 2017 and 110 yen per dollar in 2018. The dollar (Click to select) increased decreased in value and the yen (Click to select) increased decreased in value.arrow_forwardSuppose that Argentina's dollar-denominated external assets and liabilities are $10 billion and $100 billion, respectively, and its Argentine peso-denominated external assets are 70 billion pesos (P) and peso-denominated external liabilities are 50 billion pesos (P). Suppose further that Argentina fixes its exchange rate at P1.5 = $US1. a) What is the peso value of Argentina's total external wealth? Is it a net debtor or creditor? b) Suppose that Argentina changes its exchange rate to P2.3 = $US1. How does the external wealth of Argentina change when this occurs?arrow_forwardSuppose the exchange rate between the Mexican peso and the U.S. dollar is 12 MXN = $1 and the exchange rate between the Hungarian forint and the U.S. dollar is 215 FNT = $1.a. Express both of these exchange rates in terms of dollars per unit of the foreign currency.b. What should the exchange rate be between the Mexican peso and the Hungarian forint? Express the exchange rate in terms of 1 peso and in terms of 1 forint.c. Suppose the exchange rate between the peso and the dollar changes to 9 MXN = $1 and the exchange rate between the forint and the dollar changes to 240 FNT = $1. For each of the three currencies, explain whether the currency has appreciated or depreciated against the other two currencies.arrow_forward
- 5. Individual Problems 11-6 Consider two similar restaurants in close proximity to each other on either side of the U.S.-Mexico border. Suppose the dollar depreciates against the peso. The following graph shows the supply and demand curves for meals at the restaurant on the Mexican side of the border. On the following graph, shift either the supply curve or the demand curve to represent the effect of the devaluation of the dollar against the peso on the market for meals at the restaurant on the Mexican side of the border. DSPRICE (Pesos)QUANTITY (MEALS)D S The dollar devaluation helps .arrow_forwardProblem 21-04 (algo) Suppose that the current Canadian dollar (CAD) to U.S. dollar exchange rate is $0.80 CAD = $1 US and that the U.S. dollar price of an Apple iPhone is $260. Instructions: In part a, enter your answer as a whole number. In part b, round your answer to 2 decimal places. a. What is the Canadian dollar price of an iPhone? $ CAD Next, suppose that the CAD to U.S. dollar exchange rate moves to $0.92 CAD = $1 US. b. What is the new Canadian dollar price of an iPhone? $ CAD c. Other things being equal, would you expect Canada to import more or fewer iPhones at the new exchange rate?arrow_forward6. Assume that you obtain a quote for a one-year forward rate on the Argentinian peso. Assume that Argentina’s one-year interest rate is 50 percent, while the U.S. one-year interest rate is 10 percent. Over the next year, the peso depreciates by 25 percent. Do you think the forward rate overestimated the spot rate one year ahead in this case? Explain.arrow_forward
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